You know you want to own a home some day but you never feel like it’s the right time to buy, so instead you tell yourself… Eventually. The thing most people don’t know about buying a home is that timing is critical and truly does matter when it comes to this massive, life-changing purchase.
Common first time home buyer questions:
1. When is the best time to buy a house?
2. Does such a moment exist when all lights turn green, guaranteeing this is a decision you won’t regret?
3. How do I know if I’m ready?
At Fieldstone Homes, we know there is no magic 8 ball to deliver the answers you need but we can provide you with some easy-to-read signs that it’s time to consider purchasing a home. Here are some of the key factors in determining whether it’s the right time to buy.
Finances
Buying a home comes down to numbers which is why down-payments, mortgage, and credit score are the top items to consider when making your purchasing decision. Here’s why:
A Solid Down Payment
Are you planning on applying for a mortgage to buy your dream home? Most lenders will want to know you are reliable and can afford it by seeing a sizable down payment. Most conventional loans will require 20% of the homes price. To put that into perspective, 20% of a $400,000 home would be an $80,000 down payment. Accumulating that amount of money sounds challenging, but there are lenders who only require as little as 5% as a down payment.
Affordable Monthly Mortgage
Your monthly mortgage should be an amount that you can afford without causing you stress. Your monthly mortgage should take income and debts into consideration. A high income looks good but high amounts of debt is bad. Our recommendation is to check out a mortgage calculator, plug in your salary and debts to see how much you can afford.
Good Credit Score:
Your credit score is a measure of how well you’ve paid off past debts. This number is used by lenders to determine how big of a risk you are and if you will pay them back. If you have yet to build credit history, start now! Poor credit doesn’t spark a lender interest, so work on bringing it back up because a high credit score means better loan standings.
Condition of the Housing Market
The housing market is similar to the stock market, it goes through highs, lows, and bubbles. This may leave you wondering whether or not the current market conditions are conducive to buying or if you’ll end up swindled. Similar to the stock market, the housing market cannot be perfectly timed but it is important to still consider the economic conditions.
3 Things to Consider:
1. Inventory
Look at the homes for sale in your desired area and use the 6 month rule. If homes have been on the market for 6 months or more then you know the market is slow and prices should be fair. If the properties in your desired neighborhood are being sold within months or even weeks then you’re dealing with a seller’s market. A seller’s market can lead to buyer bidding wars hiking up home prices but it could also allow prices to peak and then go back down. Seek advice from a local expert you trust to help you learn the lay of the land and find the right home for you.
2. Interest Rates
The interest rate attached to home loans can fluctuate depending on the condition of the housing market. Make sure to research the interest rates in your area before applying for a loan or purchasing a home. The more knowledge you have, the better your buying power will be.
3. Renting vs. Buying
Another important thing to consider is whether you would be better of owning or renting based on the market conditions in your desired area. This is simple to figure out using a rent vs. buy calculator. Many will find that they are better off purchasing a home and paying a mortgage than paying rent.
Does Timing Matter?
The general belief in real estate is to buy when there are a lot of options, during the peak seasons of summer and spring. Because of the conventional wisdom that this is the time to buy, there may be more competition and higher prices. For this reason, you shouldn’t neglect fall and winter for home shopping, especially if the other conditions above line up. By purchasing in the off-season, the buyer will have more negotiating power while sellers are more motivated to sell and make a deal.
Seek Expert Advice
Buying a home is a major purchase and most will spend at least 5 years living in their new home so you want to make the right choice. If you’re not 100% confident in your buying power, seek a local expert to give you guidance and advice. Fieldstone Homes can help you find your dream home and put you at ease during the process.
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